The senior housing industry faces a perfect storm of challenges as demand surges amid a rapidly aging population. A crisis is looming in the sector, warns Steve Ervin, senior vice president at Berkadia, citing both government downsizing and demographic shifts as key factors.
The demand for senior housing continues to outpace supply due to shifting demographics. According to NIC Map data presented at the American Seniors Housing Association (ASHA) annual meeting, the sector's occupancy has improved for fourteen consecutive quarters, reaching 87.2%. This trend is expected to continue as favorable occupancy rates and NOI growth make senior housing an attractive investment.
Ervin emphasizes the urgency of the situation: "In the next 10 years, look at the population of the US," he told GlobeSt.com. "People over 80 will increase by 50%. There are so many people who are going to need this care. There are not enough beds, period," even with current occupancy at 82% or 83%. "You add 50% and we don't have enough."
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Despite the pressing need for more facilities, construction faces significant hurdles. "It is less expensive today to buy an existing building," said Ervin. "That is going to change." The limited focus on high-end developments further complicates the issue. "The vast majority of buildings getting built right now are for the very highest customers. These are truly elite, high-end communities." Unfortunately, most people won't be able to afford these elite properties.
As demand increases, providers will need to acquire more space. The lack of current construction will drive up prices for existing buildings, eventually making new construction more economical. However, costs are unlikely to decrease due to high prices for permitting, compliance, land, and labor.
The industry also faces a shortage of trained medical professionals. Ervin suggests that technology will play a crucial role in addressing this issue, connecting people at home to professionals and monitoring systems. As the senior housing sector navigates these complex challenges, innovative solutions and strategic planning will be essential to meet the growing needs of an aging population.
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